Bar and pub closures accelerate

Twice as many bars and pubs are going out of business as last year and the drinks industry has put out a plea for no fresh taxes in the June budget

The Turnpike Inn, overlooking Saddleworth Moor near Sowerby Bridge, West Yorkshire, closed in 2008 after the introduction of the smoking ban Photograph: Christopher Thomond for the Guardian Christopher Thomond/Guardian

The number of bar and pub firms going out of business in the first three months of the year was more than double the number in the same period last year, as the trade struggled to compete with cheap alcohol sales in supermarkets.The drinks sector is pleading with the government not to make the situation worse by imposing further duty increases in the June 22 emergency budget, a move it says could "tax it out of existence".

A total of 23 companies from the drinks sector went bust in the first quarter, compared with 11 over the same period of 2009, a rise of 109%. It brought the total number of bar, pub and nightclub bankruptcies over the past 12 months to 87.. The annual figure compares with a 36% slowdown in the broader number of corporate insolvencies.

The latest figures for the pub and club sector must act as a wake-up call to ministers about the dire state of the industry, said Anthony Cork, a director of the accountants, Wilkins Kennedy, that produced the statistics.

"The government needs to be understanding of the sector and not tax it out of existence … Such is the weak pricing power of much of the bar industry that bar operators have to either swallow tax increases themselves or lose custom to the supermarkets," he said.

Cork is also concerned that the government's proposal to review the Licensing Act, which could result in restricted opening hours for some establishments also poses a threat to some firms. "For many establishments, working on wafer thin margins and high fixed costs, any restriction in trading hours could tip them into loss," he said.

Among the companies that have run into problems recently is the London Town pubs group, which owns 44 pubs and went into administration in February. The sector has also seen some of its biggest names, such as Punch Taverns, Marstons and Greene King, forced into major cash-raising exercises.

The position of many pubs and clubs is generally accepted to have been made worse by the smoking ban and a losing battle for sales with supermarkets.

One ray of light from the new government, according to Wilkins Kennedy, is the social responsibility bill announced in the Queens speech which may see a ban on selling alcohol below cost price and lessen the competitive pressure from supermarkets.

"Bars continue to suffer an intense competitive threat from the buying might of the big four supermarkets, undercutting local establishments and encouraging people to drink at home cheaply and "pre-loading" before coming out," said Cork. "The choice available in supermarkets is so extensive that pubs can only compete on that aspect without reshuffling their contracts with suppliers and that can be difficult."